Motorists face paying £1 for a litre of petrol and household fuel bills are likely to edge higher after oil prices hit a new record yesterday.

The cost of crude oil rose to $90.02 (£44) a barrel as tensions between Turkey and Kurdish rebels in northern Iraq sparked fears about global supply and the continuing weakness of the dollar prompted investors to hedge losses by buying oil.

The chancellor, Alistair Darling, called on the oil cartel Opec to lift output as he and other finance ministers and central bank governors from the G7 leading industrial nations discussed the likely impact of soaring crude prices on the global economy.

"Opec's decision last month to increase production was welcome but doesn't go far enough," Mr Darling said. "We need to increase production because one of the causes of high oil prices is a shortage of supply."

Although the price of crude slipped slightly in later trading to $88.78, the upward pressure on the oil price is bad news for consumers already feeling the pinch from moderate earnings growth and higher interest rates. The rising oil price is likely to be passed on to motorists in the coming weeks and experts believe that the price of high street goods may also go up, along with household fuel costs.

"This is a grim start for the autumn," said Luke Bosdet at the AA. "Analysts have been predicting for a while that oil prices will rise and now the chickens are coming home to roost. The next few weeks are not going to be good."

The price of diesel has already reached a record 100.15p a litre, while unleaded is at 97.92p, just shy of the peak of 98.54 in August 2006.